Who is Sergey Mavrodi and what is remembered for: the MMM financial pyramid and other “merits”

The personality and activity of Sergey Panteleevich Mavrodi has been the center of attraction for people with a wide variety of life orientations for many years. For someone Mavrodi is a brilliant financier and entrepreneur, the author of extraordinary ideas, and for someone a banal fraudster. We will not delve into the secrets of the human soul, we will simply designate the main milestones of Mavrodi’s life associated with “MMM”.

How it all started

The birth of Russia’s first largest financial pyramid is associated with the establishment in 1989 of the cooperative “MMM”, the founders of which were Sergey and Vyacheslav Mavrodi and the wife of the main initiator Olga Melnikova. The type of activity chosen by the cooperative consisted in the sale of foreign office equipment on the territory of the USSR. The business turned out to be profitable and already in 1992 the organizational and legal form of “MMM” was changed to AOOT. This is exactly what served as the trigger for the creation of S. Mavrodi’s financial pyramid.

Development of MMM

A talented mathematician, a candidate for master of sports and his associates conducted a successful advertising campaign back in 1991: for one day they paid for the travel of citizens in the subway in all directions.

The transformation of the cooperative into AOOT opened up new opportunities. This form allows you to divide the authorized capital between a certain number of shareholders, each of whom must become a co-owner of the company and receive dividends. Such a prospect against the background of the collapse of the USSR looked attractive both for the shareholders of the Company and for its founders. In 1993, the Company issues securities (shares) in the amount of 991,000 with a nominal value of 1,000 rubles.

February 1994 was marked by the beginning of independent quotes, active propaganda and a surge in demand for MMM shares up to the hype. At this moment, the leadership of the pyramid decides to re-issue securities for another billion rubles, but this initiative has been suspended by the Ministry of Finance.

Mavrodi, as a person with an extraordinary mind and extraordinary abilities, finds a way out of the situation and issues 991,000 tickets to MMM Funds, a subsidiary of AOOT MMM. The issued tickets were not shares, which made it possible to circumvent the provisions of the law regulating the turnover of securities. The number of investors in the pyramid due to the low cost of the ticket (1/100 shares) has reached unrealistic figures. According to various sources, there were from 2 to 15 million people.

The beginning of the collapse MMM

At a certain point, the activities of the Society began to take on a political connotation. In order to divert the Government’s attention from the pyramid, Mavrodi, through the media, voices the idea of holding a referendum on confidence in the ruling elite.

At the same time, the policy of “MMM” is also changing. Now depositors are invited to contribute their savings as voluntary donations to the needs of S. Mavrodi, and in return receive a present: tickets of the Society. When repurchasing securities, the entrepreneur seemed to donate his funds, but such a scheme was not applied to the shares of “MMM”.

The quotes were set personally by the head of the company, and they were constantly growing. The situation was aggravated by the inability to register the transaction. Depositors were offered either to purchase shares without a transaction and retain the possibility of their redemption by the company at the stated price, or to register a contract and sell tickets at market value for third-party companies.

People preferred to believe Mavrodi and his stories about unprecedented profits, so there were few people willing to legalize the deal.

Crash MMM

Back on July 27, 1994, the repurchase of MMM securities was carried out as usual, but already on July 29, by the decree of S. Mavrodi, the quotes dropped to par (1000 rubles per share). And all this against the background of promises of growth of quotations twice as fast.

In early August, Mavrodi is arrested and charged with tax evasion. At that time, the stock quotes exceeded the initial level by 127 times. The office of a financial pyramid is taken by storm, a search is carried out and cash in the amount of 4 billion rubles is seized. In parallel, some of the holders of the Company’s securities are trying to get into the office and demand a refund of the invested money.

A little later on August 19, an outraged crowd of depositors goes to the White House, demanding Mavrodi’s release, but their demands remain unheeded.

In September 1997, AOOT “MMM” was declared bankrupt, depositors lost their money. At the beginning of the two thousandth, after a long investigation and consideration of the criminal case in court, the co-founders of S. Mavrodi received 5 years of probation, and the “great combinator” himself would have been sentenced to 4.5 years of correctional labor.

Stock Generation Exchange

While in custody, S. P. Mavrodi submitted documents for registration as a candidate for deputy, received a mandate, but did not fulfill his duties. Of all the privileges, he used only parliamentary immunity, and in 1996 he even put forward his candidacy for the post of president. In the same year, Mavrodi lost his mandate, the investigation resumed, an accusation of fraud appeared, and the person involved was put on the wanted list.

None of this prevented Mavrodi from living quietly in a rented apartment in Moscow and implementing new ideas. One of these ideas was the Stock Generation exchange, the official owner of which was his wife’s sister, who at that time had barely reached adulthood. It was another scam, the vast majority of whose players were from the United States. The exchange’s activities were stopped by the intervention of the American Securities Commission.

The project “MMM-2011”

AOOT “MMM”, its subsidiaries and Stock Generation exchange are not a complete list of S. P. Mavrodi’s offspring. In 2011, he made another attempt to create a financial pyramid called “MMM-2011”. The new version of MMM was disbanded by the beginning of 2013 due to the inability to fulfill obligations to depositors.

And that’s not all. So, in 2014 Mavrodi again tries his hand as the creator of the pyramid, this time trying to make money on bitcoins. In 2016, a new fraudulent scheme was launched in the countries of the African continent. Both pyramids did not last very long, despite the fact that 10 million people believed Mavrodi in the latter case.

Interesting facts about MMM and its creator

The pyramid mechanism involves the payment of profits to the first participants by attracting new ones. At the same time, the more profit the company promises, the more new investors need to be attracted. During the formation of the MMM, many people easily believed Mavrodi’s promises, and even after the collapse of the pyramid, some continue to consider its creator a martyr who suffered from the actions of unscrupulous rulers. This, perhaps, is the main paradox, and the following facts are interesting:

  1. In a very short time (about six months) Mavrodi managed to involve several million citizens in his company.
  2. Despite the accusation of fraud, the main idea generator managed to create several more pyramids after the fall of MMM.

Published: 6 October, 2021

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